South African gold heavyweight AngloGold’s merger talks, announced Friday, with Ghana-based miner Ashanti Goldfields puts it in striking distance of recapturing its status as the world’s number one gold miner by output.
The group lost this mantle to US gold miner Newmont early 2002 when it lost its bid for Australian gold miner Normandy Mining.
A merger between AngloGold (5,939-million troy ounces) and Ashanti (1,62-million oz) would create a group with total annual gold output of 7,559-million oz, a whisper behind Newmont’s 7,6-million oz and ahead of current world number three Barrick of Canada, which has annual output of 5,7-million oz.
The proposed merger of the two companies is at a ratio of 26 AngloGold shares for every 100 Ashanti ordinary shares or global depositary securities.
“The fact that AngloGold and Ashanti are already talking about a ratio indicates that there is likely to be a done deal,” an analyst said.
AngloGold representative Steve Lenahan wouldn’t comment on any detail regarding
the talks or the nature of the merger.
At 1310, AngloGold was quoted on the JSE Securities Exchange South Africa down 1,5% or R3,60 at R239,50.
“AngloGold’s share price is down following the announcement as the deal will have an diluting impact for the group’s existing shareholders. However, I think the deal, if it takes place, is value enhancing,” an analyst said.
At 1310, Ashanti was quoted at $7,75 a share up 13% from Thursday’s close of $6,85 a share.
The proposed merger ratio values Ashanti’s shares at $7,71. Any merger deal would require the approval of the Ghana government, which owns about 17% in Ashanti, and London listed platinum miner Lonmin to dispose of its interest in the company.
Lonmin has long indicated that it wanted to divest from its 28% in Ashanti. The platinum miner confirmed Friday that, as a major shareholder in Ashanti, it was in discussions with AngloGold concerning the company’s shareholding in Ashanti.
Lonmin was last quoted up 2,1% at R102,10 on the JSE.
At present, AngloGold and Ashanti already have an existing relationship with a 50:50 joint venture at Tanzania’s Geita gold mine.
Unlike AngloGold’s bid for Australia’s Normandy, which was counter-bid by Newmont, the group’s merger with Ashanti is unlikely to get another suitor from
the likes of Newmont, Barrick or South Africa’s Gold Fields (GFI), analysts said.
“Gold Fields isn’t going to get involved with Ashanti and we aren’t going to pursue it (Ashanti),” Gold Fields spokesperson Willie Jacobsz told I-Net Bridge.
Gold Fields already has the Tarkwa and Damang mines in Ghana, which produced 213,200 oz of gold or 19% of its March 2003 quarter gold output. The group is set to invest $160-million on the expansion of the Tarkwa mine (71,1% held by Gold Fields) to lift the mine’s annual gold output from its current level of 550 000 troy ounces per year to 700 000 oz. – I-Net Bridge